How high fixed costs and long payback periods encourage scale, inhibit value capture, and make it difficult to bring sustainable alternatives to market.
This is great stuff. So many new "chemistries" have gone through corn to ethanol and basically try to smash that into the existing big chemical process.
Thanks so much! Happens all the time. Even when they evade ethanol (such as succinic acid via BioAmber) they have faced similar fates—the long term economics have to add up when your business prop is long term.
Imo the dream chemical co of the future will have most advantaged and sustainable feedstocks/pathways and ability to innovate with its customers. Sustainability is now the key for upstream chems. Old ways of production will slowly disappear. But downstreams will need to keep innovating on performance. Society will demand it.
I agree with all of this, except that my dream chemical company looks different: it's AWS, but for materials. It exists in a world where energy costs are effectively zero, and converting DAC-sourced CO2 into hydrocarbons is as simple as ordering the right combination of electrochem units and assembling them on-site for your material needs. In such a world carbon moves through the atmosphere as fast as electrons transport down wires, and we desperately need to start dumping CO2 back into the atmosphere, so we have no choice but to incinerate all of our landfills.
Chemistry is boring is just to make money ask owner of chemical companies how much they actually like their chemical compounds, nobody lol and for them making sustainable makes no difference
This is a fun comment! A few things: 1) if you've made money you'd know that there's nothing boring about making money, 2) it'd be weird to "like" a chemical compound since few have inherent utility, and 3) nobody is arguing that execs act altruistically—frankly they wouldn't have become execs if they exercised the altruistic bone.
.Chemical startups are rare because they are perceived as less exciting compared to others, which attract more media attention and investment for to their quick visible impacts and lower barrier to entry. The specialized nature of chemical innovation R&D cycles length high initial costs, and the slower development of visible results contribute to a perception of tedium or even boring And, challenges of implement sustainable solutions and the changes required in manufacturing make chemical startups less appealing to entrepreneurs and investors
Media attention / visible impact is great for raising capital and helping VCs exit stupid businesses by selling to retail investors, but all those companies end up dying anyways. So in a sense you're right—the fact that the chemical business is boring does mean that less stupid money flows into the industry. But stupid money funds businesses that die. You should care more about why smart money doesn't flow in. Smart money doesn't rely on the manipulation of retail investors to get returns. Smart money tries to build good businesses and might do a bit of short term manipulation to reduce their cost of capital. But they hold and sell when value investors can't deny the value.
IMO it's not really a margin problem. Even if chemical startups can deliver software-like margins they still don't scale with the same speed and margin growth that software usually sees. I think it's best to think of it like a moving target: VCs will invest in the most exciting opportunities, and as "software eats the world" the chemical startups will looking increasingly appealing. Things just have to happen in that order. I personally believe that once we've had 1 or 2 successful chemical startups that will change a lot of VC minds. Right now we just don't have any examples of how it can be done.
This is great stuff. So many new "chemistries" have gone through corn to ethanol and basically try to smash that into the existing big chemical process.
Thanks so much! Happens all the time. Even when they evade ethanol (such as succinic acid via BioAmber) they have faced similar fates—the long term economics have to add up when your business prop is long term.
Imo the dream chemical co of the future will have most advantaged and sustainable feedstocks/pathways and ability to innovate with its customers. Sustainability is now the key for upstream chems. Old ways of production will slowly disappear. But downstreams will need to keep innovating on performance. Society will demand it.
I agree with all of this, except that my dream chemical company looks different: it's AWS, but for materials. It exists in a world where energy costs are effectively zero, and converting DAC-sourced CO2 into hydrocarbons is as simple as ordering the right combination of electrochem units and assembling them on-site for your material needs. In such a world carbon moves through the atmosphere as fast as electrons transport down wires, and we desperately need to start dumping CO2 back into the atmosphere, so we have no choice but to incinerate all of our landfills.
Chemistry is boring is just to make money ask owner of chemical companies how much they actually like their chemical compounds, nobody lol and for them making sustainable makes no difference
This is a fun comment! A few things: 1) if you've made money you'd know that there's nothing boring about making money, 2) it'd be weird to "like" a chemical compound since few have inherent utility, and 3) nobody is arguing that execs act altruistically—frankly they wouldn't have become execs if they exercised the altruistic bone.
.Chemical startups are rare because they are perceived as less exciting compared to others, which attract more media attention and investment for to their quick visible impacts and lower barrier to entry. The specialized nature of chemical innovation R&D cycles length high initial costs, and the slower development of visible results contribute to a perception of tedium or even boring And, challenges of implement sustainable solutions and the changes required in manufacturing make chemical startups less appealing to entrepreneurs and investors
Media attention / visible impact is great for raising capital and helping VCs exit stupid businesses by selling to retail investors, but all those companies end up dying anyways. So in a sense you're right—the fact that the chemical business is boring does mean that less stupid money flows into the industry. But stupid money funds businesses that die. You should care more about why smart money doesn't flow in. Smart money doesn't rely on the manipulation of retail investors to get returns. Smart money tries to build good businesses and might do a bit of short term manipulation to reduce their cost of capital. But they hold and sell when value investors can't deny the value.
What margins do you think will get VCs excited to invest in chemical startups
IMO it's not really a margin problem. Even if chemical startups can deliver software-like margins they still don't scale with the same speed and margin growth that software usually sees. I think it's best to think of it like a moving target: VCs will invest in the most exciting opportunities, and as "software eats the world" the chemical startups will looking increasingly appealing. Things just have to happen in that order. I personally believe that once we've had 1 or 2 successful chemical startups that will change a lot of VC minds. Right now we just don't have any examples of how it can be done.